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The Impact of the SBA Funding Programs on the Distance and Pricing of Loans to Small Businesses

Author

Listed:
  • Manish Gupta

    (Nottingham University Business School)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

What is the impact of Small Business Administration Preferred Lenders Program (PLP) on the distance between banks and small businesses and the pricing of the loans granted? We test predictions from a stylized transportation cost model on 7(a) loan data from 2008 to 2019. We find that non-PLP banks (the SBA) grant loans to borrowers closer-by and at a loan rate higher than PLP banks. A drop in SBA fees (in 2014) increases the distance to borrowers of both, but more so for PLP banks, and it reduces the loan rate charged by both, but less so for PLP banks.

Suggested Citation

  • Manish Gupta & Steven Ongena, 2022. "The Impact of the SBA Funding Programs on the Distance and Pricing of Loans to Small Businesses," Swiss Finance Institute Research Paper Series 22-31, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2231
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4083683
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    Cited by:

    1. Adams, Robert M. & Brevoort, Kenneth P. & Driscoll, John C., 2023. "Is lending distance really changing? Distance dynamics and loan composition in small business lending," Journal of Banking & Finance, Elsevier, vol. 156(C).

    More about this item

    Keywords

    banking sector; competition; SBA; distance; loan rate;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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